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Asian green bond market set to boom

Asian green bond market set to boom

While green bond issuances are expected to increase in Asia this year, the different types of companies issuing green bond globally are expected to be increasingly diversified.

That’s the view of Paul Milon, environmental, social and governance integration and sustainability investment specialist at BNP Paribas Asset Management.

Since 2016, the green bond market in Asia had an outstanding growth. In 2017, issuances in the region reached $129 billion, posting a solid 45% year-on-year growth.

Last year, however, the market experienced a year of consolidation, by moving back behind Europe in annual green bond issuance market share, at 30% versus 39% for Europe.

Investor appetite so far has been particularly driven by European investors, Milon told Citywire Asia. ‘We believe this will increasingly trickle into Asia eventually.’

China was the primary reason green bond got a boost in Asia in 2016. It was supported by the top government agencies, including its central bank, macroeconomic management agency and the securities regulator.

‘In fact, no less than 20% of green bonds issued globally in 2017 or two-third of the Asian total issuance were issued in renminbi,’ Milon said.

‘By far, China remains the main Asian country for green bonds, mostly through onshore issuance in renminbi.’

According to Aidan Yao, senior emerging Asia economist at AXA Investment Managers, China’s green bond market at the moment is a domestically-owned sector, with little foreign investor participation.

‘But that’s likely to change as Beijing pursues greater market liberalisation and investors’ appetite for ESG-compliant assets grows,’ Yao noted in a report. ‘China’s dominance in green bond supply is set to continue.’

Another country warming up to green bond is India, as it appears to be a well-suited solution to achieve the country’s ambitious plans to develop renewable energy.

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